Economics: What might work, what should work, what has worked (command v. open market)

[Ser Scot A Ellison]

2 minutes ago, lokisnow said:

No just that the innovations with space x are based on some very broad building blocks and their innovations are within a fairly narrow sphere.

something like human spaceflight has a pretty enormous amount of frontloaded innovation, advancement and capital costs. A fairly narrow team was able to innovate rocketry to deliver bombs in wwii, but it took a much broader effort to get into space and get living creatures there (and get them back down)

a narrow goal like “put a bomb a on a rocket, aim it at the enemy” can be accomplished by a smaller organization.

That's fair.  Different goals require different methodologies.  And without the foundation laid by NASA and the Russian Space agencies it is unlikely private companies would be able to do what they are doing today.

[Ser Scot A Ellison]

4 minutes ago, lokisnow said:

Look back to European film in the 50s 60s 70s most of it was state supported and this government fostering resulted in a flourishing of creativity and innovation that changed the entire sector.

In response to this comment from the other thread do you think a purely command style economy could really offer the same degree of innovation and creativity we see from the private sector without private capital out there as competition?

[Bennis of the Brown Shield]

3 hours ago, Crazy Cat Lady in Training said:

SpaceX isn't really doing so great on that front so far. 

NASA was established in 1958. They put a man on the moon 11 years later. In 16 years, Space X hasn't gotten nearly that far, never mind putting a man on Mars. 

NASA also had an over twenty times larger annual budget than SpaceX has today, and the difference is even more striking when you go further back in that 16 year period. 

[Seli]

26 minutes ago, Scott de Montevideo! said:

Are you suggesting a smaller agency would be better able to accomplish Human Space Flight?

It seems easier for a smaller organization to get trapped in the idea that human space flight is a sound idea and a good investment.

[Ice Queen]

11 minutes ago, Khaleesi did nothing wrong said:

NASA also had an over twenty times larger annual budget than SpaceX has today, and the difference is even more striking when you go further back in that 16 year period. 

So there ARE some things the government does better than private entities Who could have guessed? 

[Bennis of the Brown Shield]

2 hours ago, Crazy Cat Lady in Training said:

So there ARE some things the government does better than private entities Who could have guessed? 

Of course. There are also many things the private sector does better than the government, hence the need for a mixed economy. 

As for SpaceX, most of what it is doing may be about making existing technology cheaper, but that is a huge deal. The usefulness of any technology or invention is heavily tied to its price, no matter what it is. 

 

[Serious Callers Only]

What i'd be worried most would be legislation that punishes severely (i'm thinking 'large percentage of fiscal years profit or seizure of property if 'no profits') for lying on the 'news' or misrepresenting 'political entertainment' as facts. I also want to see Rupert Murdoch in prison and his works salted, but the above would be enough for me.

 

Without that, any scheme for large government investments would just get suffocated by the right wing hate/'capitalism'/white collar crime machine. And hey, it might bring back sanity to a large amount of idiots.

[maarsen]

If you want to increase government access to capital without nationalizing just about everything, change inheritance laws so that on the death of anyone with more than let's say 10 million in assets, the government taxes the estate at 90+%.

If you want to be an entrepreneur type of guy go ahead but you just can't take it with you. 

[felice]

3 hours ago, Scott de Montevideo! said:

do you think a purely command style economy could really offer the same degree of innovation and creativity we see from the private sector without private capital out there as competition?

What I'm suggesting isn't a command-style economy; it's more like nationalising the venture capitalists. As a starting point, you'd have the exact same people with the exact same funds available to invest in exactly the same way, the only difference being that they'd be paid a salary* instead of getting a return on investments, with any profit going back to the government. It can be improved from there.

For a start, the criteria for accepting a proposal should change to consider the public good. Eg a proposal to make a more addictive form of chocolate would certainly be a profitable one that any private venture capitalist would jump at, but would be rejected by anyone who takes ethics into account. And the same system could fund projects that won't make any profit but have benefits for the community, the environment, etc.

And the current venture capitalists aren't necessarily the best people for the job. You'd need a wide range of specialists in various fields to properly evaluate different proposals and determine whether they're potentially viable.

I'm also suggesting a state-subsidised crowdfunding system, where anything can get funding as long as enough people back it, no matter what the government thinks about it (anything legal, anyway).

 

(* though do the megarich actually make their own investment decisions now, or do they already hire people to do that for them?)

[Mudguard]

10 hours ago, felice said:

What I'm suggesting isn't a command-style economy; it's more like nationalising the venture capitalists. As a starting point, you'd have the exact same people with the exact same funds available to invest in exactly the same way, the only difference being that they'd be paid a salary* instead of getting a return on investments, with any profit going back to the government. It can be improved from there.

Well, for starters, you're not going to have the exact same people running the government VC funds because there's no way those people are going to do the same work on a government salary.  They would either find a different job or do the same job in a country where VC investing by private entities is still legal.  And without any skin in the game, what incentive do these government employees have to bust their ass to identify the best investments?

And what about all the private capital that is just sitting around now?  I don't get why it's a good idea for it to just sit in a bank, or be used to invest in companies in another country.  You may as well have that capital put to use in your own country.  Rather than banning investment, I'd prefer that capital gains taxes be raised instead.

That said, I'm not against the government trying to run their own VC style fund as long as private investment was still allowed.  It would be an interesting experiment to see how well the government fund could perform over a period of 20 years or so.  Malaysia's state run investment fund, 1MDB, has imploded in scandal over the last several years when it was discovered that some government officials and private individuals that were tasked with managing the fund were using it as a private piggy banks.  

Quote

Malaysia’s state-owned investment fund, 1MDB, was supposed to attract foreign investment. Instead, it has spurred criminal and regulatory investigations around the world that have cast an unflattering spotlight on financial deal-making, election spending and political patronage under former Prime Minister Najib Razak. The figures are mind-boggling: A Malaysian parliamentary committee identified at least $4.2 billion in irregular transactions related to 1MDB. Najib was ousted from power in a general election in May as the scandal fueled a voter backlash that ended his party’s 61 years of rule. Malaysian authorities charged Najib with criminal breach of trust involving 1MDB-related monies in July.

 

[Larry of the Lawn]

18 minutes ago, Mudguard said:

Well, for starters, you're not going to have the exact same people running the government VC funds because there's no way those people are going to do the same work on a government salary.  They would either find a different job or do the same job in a country where VC investing by private entities is still legal.  And without any skin in the game, what incentive do these government employees have to bust their ass to identify the best investments?

And what about all the private capital that is just sitting around now?  I don't get why it's a good idea for it to just sit in a bank, or be used to invest in companies in another country.  You may as well have that capital put to use in your own country.  Rather than banning investment, I'd prefer that capital gains taxes be raised instead.

That said, I'm not against the government trying to run their own VC style fund as long as private investment was still allowed.  It would be an interesting experiment to see how well the government fund could perform over a period of 20 years or so.  Malaysia's state run investment fund, 1MDB, has imploded in scandal over the last several years when it was discovered that some government officials and private individuals that were tasked with managing the fund were using it as a private piggy banks.  

 

This is missing the point.  I'd venture that most of the working world doesn't work hard because of the money.  Most jobs have a pay ceiling and it's not like you stop trying or doing good work just because compensation is nearly maxed out.  

I bust my ass for a lot of reasons but money certainly isn't even in the top 5.  I'm unlikely to make much more.  I could probably find an easier job that pays about the same.  But I'm not really interested.

Money isn't the only reason people try to do well.

I think you're right though that it wouldn't be the same people running things - in my mind the goal would be to develop useful technology, products and services rather than profitable ones, so I doubt that a typical VC would be a good fit.

[Ser Scot A Ellison]

1 hour ago, larrytheimp said:

This is missing the point.  I'd venture that most of the working world doesn't work hard because of the money.  Most jobs have a pay ceiling and it's not like you stop trying or doing good work just because compensation is nearly maxed out.  

I bust my ass for a lot of reasons but money certainly isn't even in the top 5.  I'm unlikely to make much more.  I could probably find an easier job that pays about the same.  But I'm not really interested.

Money isn't the only reason people try to do well.

I think you're right though that it wouldn't be the same people running things - in my mind the goal would be to develop useful technology, products and services rather than profitable ones, so I doubt that a typical VC would be a good fit.

I maintain that the biggest problem with making the State the sole source for VC is the bottleneck of having only one source with one method for determining if it will grant venture capital.  It would make the process for getting VC slow and difficult to navigate (not that it is particularly easy now).

There’s actually another thought that comes to mind, if things go bad for the start up and the business folds with private venture capital the worst you can expect is a law suit.  The State has the power of force.  If you screw up and fold with State venture capital, depending on the State, the State has the power to imprison or even kill you.  Would you want to take that risk to open “Business X”?

[SeanF]

9 minutes ago, Scott de Montevideo! said:

I maintain that the biggest problem with making the State the sole source for VC is the bottleneck of having only one source with one method for determining if it will grant venture capital.  It would make the process for getting VC slow and difficult to navigate (not that it is particularly easy now).

There’s actually another thought that comes to mind, if things go bad for the start up and the business folds with private venture capital the worst you can expect is a law suit.  The State has the power of force.  If you screw up and fold with State venture capital, depending on the State, the State has the power to imprison or even kill you.  Would you want to take that risk to open “Business X”?

There seem to a be a lot flaws with this proposal:-

1. How is it funded?  Does the government confiscate peoples' savings, or pay for it out of general taxation?  If there is no confiscation are people allowed to invest in anything other than this new government agency, which allocates capital?  What happens to banks, building societies, pension providers and stock markets?

2. It is a monopolist.  It can therefore set any terms it likes for lending/investing money.  Monopolists invariably abuse their powers.

3. What if you are an opponent of the government of the day?  Can you rely upon the government's investment agency to deal with your application for finance fairly?

4.  What if you are an influential  supporter of the government?  Will you get more favourable terms than the rest?  If your venture runs into financial difficulty, will the government agency bail you out.

5.  There's no reason to believe that governments are good at picking winners, when it comes to financing businesses.  Governments can certainly construct good infrastructure and create a business-friendly environment for firms to operate in, but the evidence from the UK at least, is that governments had a rotten track record of running businesses;  British Leyland, British Steel, the National Coal Board all lost money hand over fist.

6.  How do you prevent the investment agency simply investing in projects that the government finds useful for its survival (eg bridges to nowhere in marginal constituencies) rather than things that are actually profitable?

[Larry of the Lawn]

2 hours ago, Scott de Montevideo! said:

I maintain that the biggest problem with making the State the sole source for VC is the bottleneck of having only one source with one method for determining if it will grant venture capital.  It would make the process for getting VC slow and difficult to navigate (not that it is particularly easy now).

There’s actually another thought that comes to mind, if things go bad for the start up and the business folds with private venture capital the worst you can expect is a law suit.  The State has the power of force.  If you screw up and fold with State venture capital, depending on the State, the State has the power to imprison or even kill you.  Would you want to take that risk to open “Business X”?

Come on, who has suggested death panels for when your idea fails.  Ffs.  

I don't actually support outlawing private investment.  I've been defending it because, for one, I think democratic control of the world's resources is preferable to trusting profit to do the right thing.  I support a shift towards having major structural controls on unfettered capitalism, but I think it's actually too entrenched in the current system to do much about.   And secondly, some of the arguments against Felice's preference were flawed (see the alleged stifling of innovation).

Our laws protect a corporation making money for shareholders over everything else.  This has proven disastrous for the environment, perpetuated inequality, and contributed to concentrating the profits of all this into the hands of a few.  

For all this dollar worship, what you earn has hardly anything to do with how hard or how creatively you work. 

IP laws heavily favor corporations over individuals.  It's not like the woman or man actually coming up with the idea is necessarily rewarded for it.  

It's also not as if all innovation is supported by major VC investment right now.  Not every cool new idea needs a hundred million dollars behind it like in HBOs Silicon Valley.  

I think that especially when it comes to medicine, we need to change shit up.  There's no reason that shareholders quarterly profits are more important than public health.  When the product's profitability is given priority over its utility there is a problem.  I'm not saying someone needs to suck it up and go bankrupt making something that costs $500,000 a dose to produce.  But like with that Lyme disease vaccine, the government should have a way to step in and force a license on a patent or something to be able to manufacture a product that's being sat on thanks to antivaxxers and an uncertain market 15 years ago. 

The reality is that command vs free market is a spectrum, not an either or.  And for me, I'd rather take the flaws that come with more state (read: democratic )influence than the flaws of unrestricted capitalism.  This planet is going to shit because we priortize a shareholders profits over our children's health.  And there are motherfuckers doubling down on this shit all throughout Trumps cabinet.   

I just can't see prioritizing someone's right to be a little more rich over shit like public health, the environment, fair working conditions, etc.  And when the counter argument is "well it'll stifle innovation" I just think it's so much bs.

ETA: re: state using force on bad inventors: we already have companies like GE blow hundreds of millions of taxpayer dollars developing a products for the government that never even end up being used (see that jet engine contract that went to Pratt & Whitney or someone else back in the early 2000's).  How many members of the board did we execute?  How many of the people responsible for the financial crisis ten years ago were beheaded?  

[Free Northman Reborn]

On 7/13/2018 at 11:29 PM, Crazy Cat Lady in Training said:

SpaceX isn't really doing so great on that front so far. 

NASA was established in 1958. They put a man on the moon 11 years later. In 16 years, Space X hasn't gotten nearly that far, never mind putting a man on Mars. 

You don't have a clue what you're talking about I'm afraid. And neither do a few of the other contributors on this thread.

What SpaceX has done with the limited resources at their disposal in a decade and a half is astounding.

 

[Larry of the Lawn]

1 hour ago, Free Northman Reborn said:

You don't have a clue what you're talking about I'm afraid. And neither do a few of the other contributors on this thread.

What SpaceX has done with the limited resources at their disposal in a decade and a half is astounding.

 

Care to elaborate?

[felice]

10 hours ago, Mudguard said:

That said, I'm not against the government trying to run their own VC style fund as long as private investment was still allowed.  It would be an interesting experiment to see how well the government fund could perform over a period of 20 years or so.

A government fund would have different priorities, so of course private investment would produce greater financial returns, along with negative externalities. And as long as private capital exists, it's going to keep growing as a percentage of total wealth, which is a big problem in the long term.

8 hours ago, Scott de Montevideo! said:

I maintain that the biggest problem with making the State the sole source for VC is the bottleneck of having only one source with one method for determining if it will grant venture capital.  It would make the process for getting VC slow and difficult to navigate (not that it is particularly easy now).

I'm proposing two sources, and there's no reason the bottleneck needs to be any worse than the current situation if the VC Department is adequately resourced.

8 hours ago, Scott de Montevideo! said:

The State has the power of force.  If you screw up and fold with State venture capital, depending on the State, the State has the power to imprison or even kill you.  Would you want to take that risk to open “Business X”?

If the State is unreasonably imprisoning or murdering people, you've got bigger problems than where venture capital comes from!

8 hours ago, SeanF said:

1. How is it funded?  Does the government confiscate peoples' savings, or pay for it out of general taxation?  If there is no confiscation are people allowed to invest in anything other than this new government agency, which allocates capital?  What happens to banks, building societies, pension providers and stock markets?

Confiscate personal wealth in excess of, say, $2 million? Stock markets are abolished, banks etc can continue largely unchanged as places to store money and get loans. Pensions should be the government's responsibility.

8 hours ago, SeanF said:

2. It is a monopolist.  It can therefore set any terms it likes for lending/investing money.  Monopolists invariably abuse their powers.

3. What if you are an opponent of the government of the day?  Can you rely upon the government's investment agency to deal with your application for finance fairly?

Transparency is a strong counter to that sort of thing. Commercial sensitivity becomes largely irrelevant, so the whole process can be open to public scrutiny and criticism that makes it hard to get away with bias or corruption.

8 hours ago, SeanF said:

4.  What if you are an influential  supporter of the government?  Will you get more favourable terms than the rest?  If your venture runs into financial difficulty, will the government agency bail you out.

Nobody gets special terms; the government owns all the businesses. Any company that needs additional funds to continue would be evaluated, and either wound up, bailed out, or handed over to someone more competent to run. "Influential supporter" currently tends to mean "donates a lot of money", which would no longer be a factor, and running a business into the ground isn't going to do anyone's non-financial influence much good.

8 hours ago, SeanF said:

5.  There's no reason to believe that governments are good at picking winners, when it comes to financing businesses.  Governments can certainly construct good infrastructure and create a business-friendly environment for firms to operate in, but the evidence from the UK at least, is that governments had a rotten track record of running businesses;  British Leyland, British Steel, the National Coal Board all lost money hand over fist.

Private investors have also been known to make bad picks. I don't know much about Leyland, but Coal was a dying industry no matter what anyone did, and Steel was in a mess before being nationalised. And the government was often prioritising employment over profits, which isn't what a private owner would do but is perhaps better for the country as a whole.

[SeanF]

20 minutes ago, felice said:

A government fund would have different priorities, so of course private investment would produce greater financial returns, along with negative externalities. And as long as private capital exists, it's going to keep growing as a percentage of total wealth, which is a big problem in the long term.

I'm proposing two sources, and there's no reason the bottleneck needs to be any worse than the current situation if the VC Department is adequately resourced.

If the State is unreasonably imprisoning or murdering people, you've got bigger problems than where venture capital comes from!

Confiscate personal wealth in excess of, say, $2 million? Stock markets are abolished, banks etc can continue largely unchanged as places to store money and get loans. Pensions should be the government's responsibility.

Transparency is a strong counter to that sort of thing. Commercial sensitivity becomes largely irrelevant, so the whole process can be open to public scrutiny and criticism that makes it hard to get away with bias or corruption.

Nobody gets special terms; the government owns all the businesses. Any company that needs additional funds to continue would be evaluated, and either wound up, bailed out, or handed over to someone more competent to run. "Influential supporter" currently tends to mean "donates a lot of money", which would no longer be a factor, and running a business into the ground isn't going to do anyone's non-financial influence much good.

Private investors have also been known to make bad picks. I don't know much about Leyland, but Coal was a dying industry no matter what anyone did, and Steel was in a mess before being nationalised. And the government was often prioritising employment over profits, which isn't what a private owner would do but is perhaps better for the country as a whole.

A society in which the government owns all the businesses, stock markets and private pensions are abolished, and personal wealth  is confiscated sounds like a dismally unpleasant place in which to live.

[Altherion]

3 hours ago, larrytheimp said:

Care to elaborate?

SpaceX came up with and successfully executed something new (i.e. the landing and relatively rapid reuse of first-stage boosters) on a very limited budget. Early NASA accomplished a lot more, but they had a great deal more money to work with. Here's a chart with the budget of NASA during the Apollo Program and here's the nominal GDP of the US (you can adjust the graph to be over the same time period). At its peak, NASA spending constituted around half a percent of the entire GDP (not government spending, GDP!). If we did that today, it would add up to roughly one trillion dollars.

[OldGimletEye]

I think I’ll just advance my usual position that there that decentralized economies seem to perform better than centralized ones because one person or organization simply can’t process all the information to decide what needs to be produced.

At a first approximation, the price system (and well quantity signals too)  seems to do a fairly good job at signaling what needs to be produced.

However, I’m hardly a free market fundamentalist nut, which is my general opinion of so called “libertarians” who I have a generally low opinion of.

Certainly, the price system isn’t perfect and at times can malfunction very very badly. Certainly we saw this with the GFC with financial asset mispricing and with the price system unable to coordinate intermporal decision making leading back to full employment. And I’m not certainly not opposed to government being heavily involved in certain sectors of the economy.

I think part of the reason to want to completely socialize capital, at least here in the US, is because of bad political economy affects of the capital class getting to much power over labor, leading to bad results. And I find that certainly worrisome and it needs to be corrected. But, rather than completely socializing all capital, I’d suggest some institutional reforms, principally that would boost the political and bargaining clout of labor or unions. For one I’d like to see labor get more of a voice at the United States Federal Reserve. And, as I’ve said before, if were going to have CEO Business Roundtable, which presumes to advise the President over economic matters, then we should have Labor Round Table. And I’d support organized labor getting a voice on corporate boards.  And also I’d like the US Supreme Court to stop mindlessly acting like the giving of money is tantamount to “speech”.